AbstractsEconomics

This paper describes how David Oddson's government liberalized the economy and steered Iceland towards becoming an international financial centre, but instead steering the Icelandic economy off a cliff in October 2008, when the three largest banks collapsed. The purpose of this research is to identify causal factors to this economic meltdown. This paper explains the relationship between the government officials and the major corporations. The findings showed dubious cross-ownership and widespread nepotism among bankers as well as governmental officials before the crash, that ultimately created a system in which plutocracy flourished. The actions taken by the CBI and the government are also analyzed through macroprudential lenses. The findings illuminate that the Central bank conducted irresponsible monetary policy and the government conducted neglectful financial supervision that led to the creation of financial institutions that became 'too big to bail' through borrowing from the international wholesale money market and a country that became the epitome of small country syndrome.